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Since the 1991 balance of payments crisis, India has embarked on an ambitious program of economic liberalization. Over the past decade the Indian government has introduced a series of far-reaching reforms that have transformed the once closed economy. This paper examines the policy reforms and its impact on the economy. Overall, it argues that the reforms have been beneficial. However, major challenges remain. While the first-generation reforms have taken root, the authorities will have to carry out the more-difficult second-generation reforms, if India is to benefit fully from its liberalization program.